Help: Partnership Agreements and handling revenue.

Tldr: I need a partnership agreement for my band. Where are some good resources to choose one that fits our fairly generic needs (not google).

I've been in a band for a little over a year. We're looking at having money coming in now and I need some advice on how to handle it.

A little info about the way the band works:

1. The guitarist/singer writes and does the arranging for most the songs so the agreement would have to include that he gets all royalties to those songs. However it would need some sort of clause talking about if I or another bandmate helps in writing they get a fair share.

2. The founding member has verbally agreed to split all performing and merch sales amongst band members. We have agreed not to take any money from shows to build the business. What's the best way to continue growth AND start compensating band members for their time?

At this stage, it sounds like the most persuasive reason to enter into a band agreement is the clarity it can provide. An agreement can flesh out problems before they become problems and can offer effective dispute resolution mechanisms when problems arise. However, oddly enough, the discussions regarding band agreements can break up the band before they get started.

Similarly, I can't tell you how many artists/managers never ended up working together because the relationship blew apart over the management agreement discussions. I truly believe many of those relationships would have worked out fine if they had just started working together first before trying to hash out all of the "what ifs".

That said, I certainly understand why some people push for paperwork upfront.

Below are some of the issues to think about in connection with a band agreement:

1. Who controls the band name for purposes of recordings, merchandise, etc.? This is one of the most litigated issues in band disputes. Is the name an asset of the partnership or does one person own it and license it to the partnership? What happens if one member leaves, or if 2 of 4 people leave the band to form a new band, etc.?
2. How are band members terminated? Is there a buyout, do they remain responsible for band liabilities, etc.?
3. How are band members hired?
4. How are representatives (e.g., an attorney, manager, etc.) hired/fired?
5. Who can incur band expenses and how are they repaid?
6. What contributions (financial/property/otherwise) are required from band members?
7. How can the band agreement be amended?
8. Are their spousal issues (e.g., spousal interests in the band created by community property laws thereby giving the spouse a say in band matters)?
9. What happens upon the death, disability, etc. of a band member?
10. Can a band member assign their interest to someone?
11. How are disputes resolved?
12. How does the money get distributed? Is everyone equal partners or do some members bring more value to the band? Historically, the all for one approach only tends to work when there isnt much money at issue. Its also problematic when there is one main writer.
13. Are there special services, jobs, etc. that a certain member has?
14. How are decisions regarding the band made?

It should be noted that even in the absence of a written agreement, many bands operate under the general partnership law of their state (and the consequences that flow from it) without even realizing it. For example, general partners are usually liable for debts and liabilities arising from the negligent acts of all partners. You better hope you're never in a band where a member's action sets a club on fire and kills people.

Finally, while each band member should ideally seek independent legal counsel, thats not always possible. However, different band members may have different interests which can give rise to conflicts of interests for one attorney. That is, an attorney is supposed to advocate on behalf of the client, but how can one attorney advocate on behalf of two people who can't agree?

I AM an attorney, and even I use an outside one when I have an important legal question.

Click to expand...

Agreed.

Similarly, all of my clients have corporate, tax, trademark, estate, and other legal matters outside my area of expertise and, at my insistence, all of them use other lawyers for these matters (albeit ones I refer).

The founding member has verbally agreed to split all performing and merch sales amongst band members. We have agreed not to take any money from shows to build the business. What's the best way to continue growth AND start compensating band members for their time?

Click to expand...

You'll NEVER get a "record deal", then. That's ALL any record company is interested in.

At this stage, it sounds like the most persuasive reason to enter into a band agreement is the clarity it can provide. An agreement can flesh out problems before they become problems and can offer effective dispute resolution mechanisms when problems arise. However, oddly enough, the discussions regarding band agreements can break up the band before they get started.

Similarly, I can't tell you how many artists/managers never ended up working together because the relationship blew apart over the management agreement discussions. I truly believe many of those relationships would have worked out fine if they had just started working together first before trying to hash out all of the "what ifs".

That said, I certainly understand why some people push for paperwork upfront.

Below are some of the issues to think about in connection with a band agreement:

1. Who controls the band name for purposes of recordings, merchandise, etc.? This is one of the most litigated issues in band disputes. Is the name an asset of the partnership or does one person own it and license it to the partnership? What happens if one member leaves, or if 2 of 4 people leave the band to form a new band, etc.?
2. How are band members terminated? Is there a buyout, do they remain responsible for band liabilities, etc.?
3. How are band members hired?
4. How are representatives (e.g., an attorney, manager, etc.) hired/fired?
5. Who can incur band expenses and how are they repaid?
6. What contributions (financial/property/otherwise) are required from band members?
7. How can the band agreement be amended?
8. Are their spousal issues (e.g., spousal interests in the band created by community property laws thereby giving the spouse a say in band matters)?
9. What happens upon the death, disability, etc. of a band member?
10. Can a band member assign their interest to someone?
11. How are disputes resolved?
12. How does the money get distributed? Is everyone equal partners or do some members bring more value to the band? Historically, the all for one approach only tends to work when there isnt much money at issue. Its also problematic when there is one main writer.
13. Are there special services, jobs, etc. that a certain member has?
14. How are decisions regarding the band made?

It should be noted that even in the absence of a written agreement, many bands operate under the general partnership law of their state (and the consequences that flow from it) without even realizing it. For example, general partners are usually liable for debts and liabilities arising from the negligent acts of all partners. You better hope you're never in a band where a member's action sets a club on fire and kills people.

Finally, while each band member should ideally seek independent legal counsel, thats not always possible. However, different band members may have different interests which can give rise to conflicts of interests for one attorney. That is, an attorney is supposed to advocate on behalf of the client, but how can one attorney advocate on behalf of two people who can't agree?

Hope this helps.

Best,
MA

Click to expand...

Nice Post, Music Attorney!

As a financial services professional working in the music industry with my own company exclusively in my day gig since 1984, I would wholeheartedly agree about the above, but proceed with caution - especially the part about the relationship blowing up prematurely. No need to get agreements together until your situation warrants it. As you get more and more grounded in the industry, start putting LOTS of butts in the seats and you attract significant industry attention and offers - maybe then it is time for formalize the arrangements. Don't put the cart before the horse. The entertainment industry is a strange and fickle beast, and it's not cheap to get your ducks in a row - and I have seen a lot of projects spend thousands on this - only to call it quits a short time later. Money wasted.

Equally important in my world, is setting up the proper entities for all your songwriting, recording and performing activities as needed - and to make sure all of your tax issues are buttoned up. Find a CPA or tax preparer that truly understands and knows how to treat a client whose entire life is business - and whom ultimately is going to be functioning out of multiple entities. You know as well as I do - if you aren't in the studio or at rehearsal, you are at a gig, or you are out scouting the competition, charting songs or auditioning somewhere. Most musicians, engineers and producers are on the go at their jobs pretty much 24/7 and your tax return should be a reflection of that. Find the right guy and if you have any question marks in the back of your mind - trust your instincts. If you think he may not be the right guy, he probably isn't.